UK: Renewal Tenancy Refused Due To Breaches

(Youssefi v Mussellwhite)
Last Updated: 22 July 2014
Article by Emma Humphreys and Georgina Redsell

The Facts and Decision at First Instance

The landlord opposed the grant of a new tenancy to the tenant on the following grounds of section 30(1) of the Landlord and Tenant Act 1954:

  • Ground (a): failure to repair and maintain the premises;
  • Ground (b): persistent delay in paying rent; and
  • Ground (c): other substantial breaches of the lease and other reasons connected with the tenant's use or management of the premises. (Namely, the tenant's failure to provide access and breaches of the user covenants in the lease).

As these grounds are discretionary, the landlord also needed to show that the tenant "ought not" to be granted a new tenancy in light of these breaches.

The Judge found that in respect of eight alleged items of disrepair, only the presence of a creeper growth on the rear external wall of the building was substantial enough for the purposes of ground (a). Whilst this was not a breach of the tenant's repairing covenant, the Judge held that it was a sufficiently serious breach of an implied obligation to use the premises in a "tenant like manner" and this, taken with the state of decoration of the ground floor of the premises and other factors regarding the tenant's behaviour, justified not granting a new lease. The landlord was also successful in relying on ground (c) because the tenant had persistently refused to allow the landlord access to inspect the premises in breach of her lease and had failed to use the premises as a shop within one of the designated use classes specified in the lease. The delay in paying rent was held as insufficient to establish ground (b).

The tenant appealed the decision on grounds (a) and (c).

Court of Appeal Decision

Whether in light of the breaches the tenant "ought not to" be granted a new Tenancy

The Court of Appeal found that when deciding whether a fresh tenancy "ought not" to be granted, this question was to be considered in respect of each ground separately:

Ground (a): the Court must ask itself whether in light of the state of repair of the premises brought about by the tenant's breaches of covenant the tenant "ought not" to be granted a new tenancy. In approaching this question, the Court should focus exclusively on the state of repair of the premises and determine - looking forward to the new hypothetical term - whether the proper interests of the landlord would be prejudiced by continuing with the same tenant.

Ground (b): similarly, the focus should be on the persistent delay in paying rent and nothing else.

Ground (c): the approach is broader as the Court can look not only at other substantial breaches but also any other reason connected to the tenant's use or management of the premises.

The Court held that it is unnecessary for a landlord to prove that the relevant breach adversely affects its rental income or the value of the landlord's interest as this would be an inappropriate constraint on the wide discretion given to the Court.

Ground (a): Disrepair

The Court of Appeal overturned the Judge's decision in relation to ground (a). The Court found that, although the tenant may have had a responsibility to keep down weeds in the garden and control plants generally, the failure to keep in check the unrestricted plant growth on the rear wall of the building was not a breach of the tenant's repairing covenant. Moreover, even if this had been a breach of the tenant's repairing obligation, it was accepted that a tenant's failure to repair has to be substantial for the purposes of ground (a) and the situation here was not a substantial breach given that the cost of carrying out the work to remedy the breach was £350.

Ground (c): Other substantial breaches and other reasons

Breach of access covenant

The Court of Appeal upheld the first instance decision in respect of ground (c) on the basis that it was clear from the evidence that the tenant had thwarted attempts on behalf of the landlord to access the premises on numerous occasions. The Court also found that it was irrelevant to the consideration as to whether these breaches were substantial that the landlord had admitted that she did not want to renew the tenancy as she wanted to sell the property with vacant possession because she had become exasperated with all of the issues surrounding the tenancy. Similarly, the fact that the landlord was unable to show any loss from the tenant's breaches was also irrelevant and in any event it was obvious from the evidence that the landlord would have incurred abortive surveyors' fees in respect of the attempted inspections.

Breach of user covenant: the failure to open the premises as a shop

The Court of Appeal also upheld the first instance finding that the use of the premises for the preparation of cold meals off the premises did not fall within the use classes specified in the lease. It agreed that this breach of user was substantial and that the tenant ought therefore not to be granted a new tenancy. It was considered highly relevant that the tenant had made no attempt to operate her business within the use classes specified in the lease within the 3 years since she had been notified by the landlord of the breach.

The Court of Appeal found that it was not incumbent on the landlord to show a quantifiable loss to the value of her interest in the premises as a result of the breach of user in order to demonstrate that the tenant "ought not" to be granted a new tenancy; it was open to the Court to find that the breach was prejudicial to the legitimate interests of the landlord in the absence of any evidence to the contrary by the tenant. It was not hard to envisage, for example, that a sale of the landlord's interest with a business tenant in possession would achieve a better price if the tenant was conducting a user compliant business.

Comment

Situations such as this one will not often arise but it is a useful reminder for landlords of the possible other grounds of opposition available under the 1954 Act that may be relied upon if there are substantial subsisting breaches of covenant when considering serving a section 25 notice or a counter-notice to a tenant's section 26 request. In addition, tenants should be alive to the risks of not taking steps to remedy their breaches of lease.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Emma Humphreys
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